Friday, June 3, 2011
It has been a roller coaster ride on the economic front. Nationally, home prices and job creation fell again, and some analysts now proclaim a double dip recession is underway.
But economists here in San Diego aren't necessarily buying into that story line.
It has been a roller coaster ride on the economic front, though mostly it's been that stomach-churning feeling of going down. Nationally, home prices and job creation fell again, and some analysts now proclaim a double dip recession is underway. But economists here in San Diego aren't necessarily buying into that story line. We'll talk about the current prognosis for San Diegans.
Guests: Dean Calbreath, economics reporter, San Diego Union Tribune
Liam Dillon, reporter, Voiceofsandiego.org.
David King, editor and founder of Sandiegonewsroom.com
ST. JOHN: Trying to make sense of the economy? Stay with us as we chew over the latest reports and tease out some trends of the later the San Diego's mayor's race is filling up with high profile names. What does the city need? And who's got what it'll take? This is KPBS Midday Edition round table. In is Friday, June third, I'm Alison St. John. And with us at the round table today, we welcome Dean Calbreath from the San Diego Union Tribune. Great to see you dean.
CALBREATH: Great to be here.
ST. JOHN: Liam Dillon who is the [CHECK AUDIO].
DILLON: Good morning, Allison.
ST. JOHN: And David King, who is founder and editor of San Diego news am radio. David, good to see you.
KING: Good to see you, Alison.
ST. JOHN: So it's been a roller coaster ride on the economic front this week. Though mostly it's been that stomach churning feeling of going down. National home prices and job creation fell again. Some analysts are now proclaiming a double dip is under way. But economists here in San Diego aren't necessarily buying into that story line. So we'll talk about the current prognosis for San Diego. Dean, let's start with the latest report, the one about jobs. So job growth fell even worse than, I understand, than analysts had predicted. But what is the picture here in San Diego?
CALBREATH: I think here in San Diego we experienced such a major hit early on, that there's a good possibility, and I think this is one of the things that the economists are considering, that we've experienced the pain that [CHECK AUDIO] maybe we won't go into the double dip because we've already come so low. Now that might be an overly optimistic, view, but it could work out to be true. But nationwide, I think there's a strong possibility of a double dip in the recession.
ST. JOHN: So what is it about San Diego that's different where it sounds like we're under 10†percent unemployment now for the first type. Where are we seeing the jobs?
CALBREATH: Well, a lot of the jobs are tourism related, a lot of the jobs are the very low paying jobs that have been sort of our economic engine over the past decade or so but that have not kept pace with this, you know, expenses in San Diego lifestyle.
ST. JOHN: Are we doing better than the rest of California?
CALBREATH: We are, we're doing much better than the rest of California. And we've been doing better throughout the recession. The rest of California is right now around 12 percent, hovering at that 12 percent mark for unemployment. Like I say, we have gone through a lot of our foreclosure problems that some of California is still going through, and some of the rest of the nation is still going through.
ST. JOHN: And then manufacturing, I gather that we have gained some manufacturing jobs.
CALBREATH: We've gained manufacturing, that's really hard to say. Nationwide, we've gained manufacturing, and part of that is the restoration of the auto industry. With San Diego, we do have a lot of small shops, relatively small shops that are involved in thing it is like solar panels, involved in new technologies that count as manufacturing. It's mostly light manufacturing, not the heavy automotive that you might see elsewhere in the country.
ST. JOHN: And while we're on the subject of jobs, one of the big job losses has been in the public sector, hasn't it in.
CALBREATH: Absolutely. And this is one of the things that make the current report so bad. Nation wide, we gained about 90 thousand jobs in the private sector. But that was counter balanced by 30 thousand job loss in the public sector, in local and state governments. And those losses are gonna continue. And one thing that people don't appreciate, they think oh, we need to pare down government, we're paying too many taxes, we need to pare down the size. One thing people don't appreciate is, when these jobs get Los, number one is they boost the unemployment rate, so you've got more people competing for a still relatively low amount of jobs, as well as these people who had income to go out buying things to pay for the rent on their house, that income is being cut off. And that has a huge rippling effect throughout the economy. So eventually you'll see those private sector job losses tied to these public sector job losses.
ST. JOHN: So Liam, have you detected any concern among City Council members about laying off city workers adding to unemployment in the region.
DILLON: Again, next week, the City Council's about to pay us another budget that including another round of position cuts. And the city's at a level now, we're at the lowest level of employees per capita, since at least the early '80s and that's just a huge decline in the number of people who have been working for the city. And as dean said, it should be the economy.
ST. JOHN: Do you know how many we have approximately now?
DILLON: It's still about between 10 and 11 thousand. But as far as the general fund numbers, that goes down, and they're going down even in sectors that people think are the most important. Once again, there's another 20 cop positions that are on the line to be cut.
ST. JOHN: And David, how much can local government affect employment? What can the city government do for example to shore up new jobs? Well, the city is obviously operating --
KING: Within its own budget constraints and the private sector of the city's job cuts comes back to, well, you see a lot of jobs that are cut on paper, but you're not talking about real people losing their jobs. [CHECK AUDIO] you are seeing threats of real layoffs. More so over at the school district, which is also -- you hate to see anyone lose their job. That's a detrimental thing for the economy. But the long-term impact of bigger schools, or excuse me, bigger class sizes and fewer teachers and everything in the long-term impact that'll have on our economy, I think that's probably a more important consideration for California's economy, and San Diego, our region's economy is how well are we gonna educate our kids.
ST. JOHN: But is the private sector in a position to create more jobs than we're losing on the public sector here in San Diego?
KING: We keep going back to this chicken and egg problem because we've got so many people employed by small businesses in San Diego. And so many people are closing their businesses, restaurants, small jobs, day in and day out, people are going out of business upon starting new businesses, people need some sort of credit to get up and running, banks aren't lending and what people have done for the past five, 10 years to finance a new business is to borrow against their homes. That's wiped out. So it starts with the bank, it starts with where do we get some money to take a risk and go out and start a new business? And since we've got slower spending, you've got far more people going out of business in small businesses than starting new ones. It's not until you see property values coming back up and banks willing to lend again that you'll see the San Diego small business engine boom.
ST. JOHN: If you have a question for our round table here about how San Diego's economy is shaping up, give us I call. 1-888-895-5727 is the number to call. So dean, moving on to house prices, which David has sort of alluding to in terms of banks and borrowing, because I think that's really where the key is, so home prices nationwide really fell dramatically in the first quarter of this year. Where does San Diego stand in relation to that?
CALBREATH: San Diego has also been falling in the first quarter 678 we're still ahead or -- I can't remember the last number. But we are not that often compared to last year at this time. But we're getting there. And I think both nationwide and locally, we're thought of as being in a double dip in housing prices at least.
ST. JOHN: I see. Well, we had some people who disputed that on the show earlier this week, but you would say perhaps in this case San Diego is --
CALBREATH: In this case, we're reflecting the trend. Again not to the extent it is nationwide because our housing prices got so much lower here during the first stages of the recession than they did nationwide, that we probably have less room to dip, but we are dipping.
ST. JOHN: David, I noticed in the home price index, Washington DC was the only metropolis in the country where home prices didn't go down. Is that because the federal government is the only growth industry do you think?
KING: It's probably you got the standard amount of turn over and lobbyists and congressmen to come in and out and can afford those homes in Washington DK, and the rest of the people that rent and don't move, I think Washington is such a unique market that it's kind of an aberration. [CHECK AUDIO] [CHECK AUDIO].
ST. JOHN: It sort of makes you suspect that there might be a percent on the part of lenders to keep politicians' feet out of the fire, as it were.
KING: Anyone who can afford to live in one of those brown stone jobs in Georgetown is gonna [CHECK AUDIO].
CALBREATH: Having lived in Washington, it seems like every two years you've got this turn over to capital hill, 2010 was the election, you had some turn over, a lot of those people go to lobbying firms, they stay in Washington, then Congress hires a lot more people to come in. And so it's -- a lot of it is related to the season at of the Washington industry.
KING: We had Republicans elected in 2010, so they came in, and they're richer, and they're gonna pay more for their homes than the Democrats. That might be it.
ST. JOHN: There's a theory for you. So keen, one of the reasons they're saying the house prices are going down is because those house credits for first time home buyers really boosted the market last year. But do you think that was even worth pureeing all that money in if the house market was just gonna slip again as soon as they stopped?
CALBREATH: I think hindsight is 2020. In theory, it may have been a good idea at the time. Under the assumption that the private sector was gonna rev up, and soon people would be earning enough money to be making their payments on their own. But as it turns out, as throughout the recession, going back to 2007, people have been overly optimistic with the recession. I think the stimulus program, people campaign about its KPBS, but I think the stimulus program was actually smaller than what we needed at the time. And that's one thing that we're experiencing now, that not enough was done or not enough money was spent wisely to keep the economy going.
ST. JOHN: Some people are saying that when May's numbers come out, we'll actually be able to compare more accurately the home prices with last year because that was right after all their incentives finished. Do you think that's just people trying to cling onto false hope or --
ST. JOHN: Okay. So let's just talk about banks a little bit, because David, as you said, it seems like it all depends on when the banks are gonna turn around and start letting people borrow more. What here in San Diego do you think needs to happen for banks to start loosening these purse strings.
KING: Well, I think it's an integrated systemic issue, that banks not only nationally but internationally, once they feel that their balance sheets are solved, and that they're strong again, they'd feel comfortable going out and taking more assets. So the biggest assets they've got are home loons, and then these repackaged home loans, and then these securitization of home loans, if the value of homes continue to drop and remain soft, the banks are not inclined to go out and get more of these banks on their balance sheet. Go out and make more loans for homes. It's not until they feel like things have stabilized with homes because that is such a large portion of the bank's balance sheet.
ST. JOHN: And dean, is it more waiting [CHECK AUDIO].
CALBREATH: That's both those, and credit to a large extent too. For the past -- gosh, you know, for maybe the past 20 years, our wages really have not been keeping up with inflation, and the way that we have made up for that is by relying on credit. Now the credit's not there. Credit hasn't been there for a couple year, and part of it is that effect of not being able to rely on credit cards or home equity and other lines of credit.
ST. JOHN: Liam.
DILLON: Yeah, I guess for me, it's just touch to see how we get back to the prerecession levels of employment, because [CHECK AUDIO] really shouldn't have been here to begin with because they were based on the housing bubble. So when you tie the two together, I just don't know how quickly we can grow without any other bubble of some sort.
ST. JOHN: Right. And it's interesting because building permits are up, aren't they, dean, but not for single homes.
CALBREATH: They are up, if you they're up from one of the three lowest years in history, and those three lowest years were 2008, 2009, and 2010. Those were the lowest years on record. We are up, but we're up from the bottom, bottom basement.
ST. JOHN: And it's interesting that the building permits we're seeing are for multifamily homes, which I'm kind of curious to see, is that gonna in the future change the character of a way in San Diego, which is so much focused more on single family home, moving it more towards multifamily.
CALBREATH: I think probably eventually, and maybe hopefully eventually it will. I think the way we have structured cities, the way that we have structured housing leads to these kind of problems. That we don't have homes where people can walk to work. We don't have these -- the homes that they have in Europe or in Japan or other industrialized countries.
ST. JOHN: Well, we'll keep an eye obviously on the economy as it goes on. But this week's news was pretty perturbing, I would say. Stay with us here on the round table, coming up, it's early days but just like in the presidential race, candidates are beginning to throw their hats in the ring for the San Diego mayor's race. So we'll take ache closer look on the emerging field. That's coming up on KPBS Midday Edition round table.